Who doesn’t love imported goods? From stylish clothes, unique foods, to cutting-edge technology imports always have their charm. But did you know that long ago, countries like England had super strict rules governing imports, especially from countries they thought weren’t good trade partners? Adam Smith, the father of modern economics, bluntly called these rules absurd and unreasonable!
In this article, we’ll dive deep into why those complicated and protectionist trade restrictions were not just ineffective, but also sour the relationships between countries. Let’s get started!
The Absurdity of Excessively Strict Import Rules in the Commercial System’s Own Terms
If you think trade protectionism is a modern phenomenon, think again! Adam Smith was already talking about this back in the 18th century. For example, England had rules stating that importing French goods like fabrics or wine meant paying sky-high taxes or even being banned from the domestic market, while goods from countries like Portugal faced much lighter duties. Imagine being told you can’t attend a neighbor’s party just because you’re wearing red, while others are free to enter in whatever they want.
Why was England so protective of French goods? Smith explains it’s because of national bias and political hostility, making countries prefer restricting imports from “rivals” or even “enemies.” But in reality, this made trade unfair and hurt themselves more than anyone else.
Smith amusingly compares it to owning a clothing store: if French fabric is better and cheaper, why buy pricier fabric from elsewhere just because of government rules? Instead of making a profit, you end up paying more.
So even according to the commercial system’s own logic, these rules were completely irrational!
But hold on, we’re not done yet. Beyond the flawed trade rules themselves, Adam Smith highlights bigger reasons why free trade benefits everyone more. Let’s move on!
The “Balance of Trade” Concept A Widely Misunderstood Myth
Now for a heavier but crucial topic: what is the balance of trade really, and why does Adam Smith say the concept is often totally misunderstood?
The old trade system thought that if a country imported more than it exported, it was losing. But Smith says this is not always true! Imagine running a stall selling goods worth $100, but buying goods worth $120 from your neighbors. According to old thinking, you’re losing $20. But if those $120 goods are better or more needed, you’re actually winning.
Smith clarifies that the real important measure isn’t how much gold or silver comes into a country, but how much valuable goods and services its people can produce and consume. If people have more and better quality products, that’s real wealth not just trade balance sheets.
So focusing only on gold and silver is like counting your wealth just by the cash in your wallet, ignoring your bank savings, investments, and assets. What a waste, right?
Got the hang of the balance of trade myth? Next, Smith explores how protectionism fuels animosity and losses on all sides. Let’s dive deeper.
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The Ugly Side of “Jealousy” and “Monopoly Spirit” in International Trade
This part’s juicy and probably familiar: business rivalries that make countries suspicious and eager to undercut each other. Smith calls this the “monopoly spirit” and “commercial jealousy.”
Imagine two neighboring countries that used to trade happily, but then start distrusting each other and protecting their industries with harsh import rules. The result? Trade slows, prices rise, and ordinary citizens end up suffering.
Smith puts it humorously: “It’s like neighbors who used to get along suddenly sulking because you buy vegetables at the market next door, not theirs.” If they just maintained good relations and free trade, everyone would gain.
But ironically, big merchants and manufacturers sometimes love making complicated rules that block competition, securing monopolies that make them rich while the public pays more and faces fewer choices.
Seen how commercial jealousy can hurt everyone? Now, let’s peek into a real historical drama the trade tussle between England and France.
England and France: From Economic Warfare to Smuggling
Smith chronicles the long saga of Anglo-French trade rivalry that looks like a soap opera. England imposed huge taxes on French imports, nearly banning them from the market, and France reciprocated with equal harshness.
Official trade nearly froze, but smugglers became the unexpected heroes, keeping goods flowing in secret.
Imagine owning a store but forbidden to sell your neighbor’s products so you secretly buy them elsewhere to keep your business alive.
Smith sharply criticizes this political and nationalistic trade mess as causing losses to all, especially ordinary people who pay higher prices.
From England and France’s story, we learn how overly tight trade rules aren’t just silly but downright harmful. Now, let’s see why free trade makes much more sense and benefits everyone.
Why Free Trade Should Be the Way to Go
Smith boldly states that trade freely conducted without force always benefits both parties, even if not always equally.
Picture swapping goods with a friend you give apples, they give sweeter, fresher oranges. Both happy because you get what you want. Countries trade the same way: exchanging goods based on needs and advantages.
Smith also reassures not to fear importing more than exporting. What matters is the value you get back. So if England imports tasty French wine in bigger volume, that’s a win since English people enjoy quality wine and French growers get markets.
This reminds us that a nation’s wealth is measured by the wellbeing of its people, not just by complicated trade balance sheets concocted by merchants and officials.
Don’t Fall Victim to Complicated Rules Embrace Free and Fair Trade!
If you’ve thought “Free trade is dangerous foreign goods will kill local businesses,” Smith has already debunked that.
Strict rules mostly protect vested interests, not the general public.
Healthy free trade promotes competition, better products, lower prices, and more choices. People prosper, economies grow, and countries build friendships.
So rather than stressing over confusing import restrictions, learn from Adam Smith and understand how open, fair trade benefits us all maybe even making you a savvy global trader someday!
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